BB 107(spring) Tutorial 7(s) PDF

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All the tutorial questions are included....

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BB 107

Tutorial 7

Part A: MCQ 1.

For a purely competitive seller, price equals:

A.

Average revenue.

B.

Marginal revenue.

C.

Total revenue divided by output.

D.

All of these.

2.

For a purely competitive firm total revenue:

A.

Is price times quantity sold.

B.

Increases by a constant absolute amount as output expands.

C.

Graphs as a straight upsloping line from the origin.

D.

Has all of these characteristics.

3. In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: A.

Marginal cost is greater than marginal revenue.

B.

Average cost is greater than average revenue.

C.

Average fixed cost is greater than average revenue.

D.

Total revenue is less than total variable costs.

4. In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: A.

A point of maximum economic profit.

B.

A point of minimum economic loss.

C.

A point where MR = MC.

D.

A break-even point.

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5. The wage rate increases in a purely competitive industry. This change will result in a(n): A.

Decrease in average total cost for a firm in the industry.

B.

Decrease in average variable cost for a firm in the industry.

C.

Increase in the marginal cost curve for a firm in the industry.

D.

Increase in short-run average fixed cost for a firm in the industry.

6. In the short run a purely competitive firm that seeks to maximize profit will produce: A.

Where the demand and the ATC curves intersect.

B.

Where total revenue exceeds total cost by the maximum amount.

C.

where marginal revenue equals marginal cost.

D.

Both B and C .

7.

A firm reaches a break-even point (normal profit position) where:

A.

Marginal revenue cuts the horizontal axis.

B.

Marginal cost intersects the average variable cost curve.

C.

Total revenue equals total variable cost.

D.

Total revenue and total cost are equal.

8. In the short run the individual competitive firm's supply curve is that segment of the: A.

Average variable cost curve lying below the marginal cost curve.

B.

Marginal cost curve lying above the average variable cost curve.

C.

Marginal revenue curve lying below the demand curve.

D. Marginal cost curve lying between the average total cost and average variable cost curves.

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9. Resource costs increase in a purely competitive industry. This change will result in a(n): A.

Increase in average fixed cost for a firm in the industry.

B.

Decrease in average variable cost for a firm in the industry.

C.

Decrease in the marginal cost curve for a firm in the industry.

D.

Decrease in the short-run supply curve for a firm in the industry.

Part B: Short Answer 1. Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly.

2. Under which of these market classifications(ref. Q1) does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) an Australian wheat farm. In each case justify your classification.

3. Use the following demand schedule to determine total revenue and marginal revenue for each possible level of sales:

a. What can you conclude about the structure of the industry in which this firm is operating? Explain.

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b. Graph the demand, total-revenue, and marginal-revenue curves for this firm. c. Why do the demand and marginal-revenue curves coincide?

4. “Even if a firm is losing money, it may be better to stay in business in the short run.” Is this statement ever true? Under what condition(s)?...